Donald Trump's election has Wall Street questioning the future of the Federal Reserve

As Wall Street grapples with the election of Donald Trump as the
next US president, it appears the order of the day is
uncertainty.

Among the myriad uncertain consequences of Trump's election is
the real possibility of a major shake-up at the Federal Reserve.

Jefferies economist Sean Darby said that in terms of possible
problems for the economy going forward the "main risk is monetary
policy uncertainty."

The most striking uncertainty for some analysts is the political
independence of the Fed — to not have monetary-policy decisions
influenced by ever-shifting political tides has long been a key
aspect of the central bank.

Some analysts now say that independence may no longer be assured.

"Ultimately," T. Rowe Price's chief US economist, Alan Levenson,
said in a note to clients Tuesday night, Trump's proposals
"threaten to undermine global faith in the independence of the
Federal Reserve and the geopolitical standing of the United
States."

"The future of Janet Yellen's chairmanship and the accommodative
nature of Fed monetary policy are in doubt," Edward Mills of FBR
Capital Markets said.

Deutsche Bank strategist George Saravelos agreed that the future
of Yellen's job was uncertain.

"Even more importantly the market will be looking for
confirmation that Chair Yellen will not resign," Saravelos said
in a note to clients. "Trump has been particularly critical of
her term so policy continuity will be particularly important."

On the other hand, Michael Feroli, an economist at JPMorgan,
wrote before the election that Yellen's resignation was unlikely.
For one thing, Feroli noted, that there is seemingly no way that
Trump could actually fire Yellen.

The economist also said a Federal Reserve chair resigning was
unprecedented, but there is another political reason for Yellen
to stay on. "Moreover, we don't see a rationale for the
apparently Democratic Yellen to give President Trump even more
influence over the course of monetary and regulatory policy by
immediately stepping down," Feroli wrote. "That said, we doubt
she would stay on as Governor even after her term as Chair
expires."

In the near term, analysts are also split on whether the Fed will
interest raise rates in December. Market probabilities for a rate
hike in December have fallen from 84% on Tuesday to as low as 42%
overnight,
according to Bloomberg data.

On the one hand, the market volatility following the election has
convinced some that the Fed will be on hold.

Quentin Fitzsimmons, an international bond manager at T. Rowe
Price, said market uncertainty coming out of the election would
cause the Fed and other central banks to wait for more clarity
before adjusting policy.

"When faced with volatility central banks tend to kick the ball
further into the long grass — so they may end and maybe deepen
their easing cycles," Fitzsimmons said.

Saravelos agreed that a December rate hike was dead.

"When it comes to monetary policy, in the short term, it looks
like a December rate hike is off the table," the strategist said.

David Kelly, the chief global strategist at JPMorgan Funds, said
Trump's election at least lowered the chances of a hike. "The
uncertainty and volatility following the U.S. election will, for
now, reduce the probability of a Federal Reserve rate hike in
December," Kelly wrote, "although the Fed will want to leave its
options open until it can assess the market and economic fallout
from the election result."

On the other hand, others said the strong fundamentals of the
economist would keep the Fed on track.

"Unless market volatility weighs on the real economy,
particularly jobs, we think the Fed still hikes in December,"
David Bianco, the chief US equity strategist at Deutsche Bank,
said in a note to clients.